19-0905 Thursday “Daily Bugle”

19-0905 Thursday “Daily Bugle”

Thursday, 5 September 2019

The Daily Bugle is a free daily newsletter from Full Circle Compliance, containing changes to export/import regulations (ATF, DOE/NRC, Customs, NISPOM, EAR, FACR/OFAC, FAR/DFARS, FTR/AES, HTSUS, and ITAR), plus news and events. Subscribe here. Contact us for advertising 

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[No items of interest today.]
  1. Items Scheduled for Publication in Future Federal Register Editions 
  2. Commerce/BIS: (No new postings.) 
  3. State/DDTC: (No new postings.)
  4. Canada TID Publishes Notices to Brokers & Notice to Exporters
  1. Deutsche Welle: “German Prosecutors Investigate Spyware Maker Finfisher”
  2. Expeditors News: “CBP Publishes Guidance on the Fourth List of Section 301 Trade Remedies”
  3. Reuters: “South African Defence Firm RDM’s Turnover Hurt by Export Headaches”
  4. ST&R Trade Report: “Determining Origin for Section 301 Tariffs Poses Challenges”
  1. M. Ha: “Treasury Heightens Pressure on Facilitators of North Korean Sanctions Evasion”
  2. M. Rendon: “Are Sanctions Working in Venezuela?”
  3. T. O’Meara: “The Tariff Classification of 18 Human Heads!”
  1. ECS Presents “2nd Annual ECS ITAR/EAR Symposium and Managing ITAR/EAR Complexities” on 17-19 Sep in Annapolis, MD 
  2. FCC Presents “Designing an ICP for Export Controls & Sanctions”, 1 Oct in Bruchem, the Netherlands 
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Latest Amendments: DHS/Customs (5 Apr 2019), DOC/EAR (21 Aug 2019), DOC/FTR (24 Apr 2018), DOD/NISPOM (18 May 2016), DOE/AFAEC (23 Feb 2015), DOE/EINEM (20 Nov 2018), DOJ/ATF (14 Mar 2018), DOS/ITAR (19 Apr 2019), DOT/FACR/OFAC (4 Sep 2019), HTSUS (3 Sep 2019) 
  3. Weekly Highlights of the Daily Bugle Top Stories 


[No items of interest today.] 

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OGS_a11. Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register, 5 September 2019.)

* Treasury/OFAC; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals: Hizballah Financial Sanctions Regulations Report on Closure by U.S. Financial Institutions of Correspondent Accounts and Payable-Through Accounts [Pub. Date: 6 Sep 2019.]
* Treasury/OFAC; NOTICES; Blocking or Unblocking of Persons and Properties [Pub. Date: 6 Sep 2019.]

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Commerce/BIS (No new postings.)

(Source: Commerce/BIS)

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Canada TID Publishes Notices to Brokers & Notice to Exporters

(Source: Canada TID, August 2019.)
The Canada Trade Controls Bureau (TID) has published the following notices on its website:

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Deutsche Welle: “German Prosecutors Investigate Spyware Maker Finfisher”
(Source: Deutsche Welle, 5 Sep 2019.)
Munich prosecutors have launched a probe into a company accused of illegally selling spy software, German media report. The FinFisher product was reportedly used against opposition protesters in Turkey.
Public prosecutors in Munich are investigating whether German company FinFisher broke the law by exporting powerful spying software without a permit. …
Germany has classified software and devices that can be used to spy on people as dual-use products, which could serve civilian as well as military purposes. To avoid misuse, such products must be approved for export by the Federal Office of Economics and Export Control (BAFA), part of the Economics Ministry, before they can be sold in a non-EU country.
The software in question was developed in 2016, according to an analysis of its source code by digital rights group Access Now and independently confirmed by a German university. A spokesman from the Economy Ministry said the government had not issued any export permits for spying software since 2015, meaning that according to the NGOs the export must have happened without a permit. …

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Expeditors News: “CBP Publishes Guidance on the Fourth List of Section 301 Trade Remedies”
(Source: Expeditors News, 4 Sep 2019.)
On August 30, 2019, U.S. Customs and Border Protection (CBP) published in Cargo Systems Messaging Service (CSMS) #39587690, updated information on the fourth list of products of Chinese origin subject to the Section 301 Trade Remedies.
Per the CSMS, list 4A went into effect for products entered, or withdrawn from warehouse for consumption, on or after 12:01 AM Eastern Time on September 1, 2019. The products covered by List 4B will go into effect for goods entered, or withdrawn from warehouse for consumption, on or after 12:01 AM Eastern Time on December 15, 2019.
In addition, CBP advises that entries of any product eligible for admission into a Foreign-Trade Zone under “domestic status” which is subject to the additional duty on or after September 1, 2019, for list 4A and December 15, 2019, for list 4B, may be admitted only as “privileged foreign status”.
CBP notes that entries subject to Section 301 duties are eligible for CBP’s drawback program. Additionally, the CSMS states that the U.S. Trade Representative will establish a process for interested parties to request exclusions for products covered by list four.

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Reuters: “South African Defence Firm RDM’s Turnover Hurt by Export Headaches – CEO”
(Source: Reuters, 5 Sep 2019.) [Excerpts.]
Months of delays in export approvals will hurt Rheinmetall Denel Munition’s (RDM) turnover this year and could force the South African defence firm to halt production this month, its chief executive told Reuters.
RDM, a joint-venture between German industrial group Rheinmetall and South Africa’s state arms firm Denel , has been a stand-out performer in a struggling industry since it was established in 2008. …
The hold-up, which has affected South Africa’s entire defence industry, is largely due to the post-election reconstitution of the National Conventional Arms Control Committee (NCACC), which regulates exports.
Schulze said RDM believed the NCACC had also placed a hold on exports to Saudi Arabia and the United Arab Emirates, which are involved in a conflict in Yemen. …

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ST&R Trade Report: “Determining Origin for Section 301 Tariffs Poses Challenges”
(Source: Sandler, Travis & Rosenberg Trade Report, 5 Sep 2019.) [Excerpts.]
There continue to be conflicting reports in the press about the correct test to apply to determine country of origin for purposes of the Section 301 tariffs the U.S. is currently imposing on imports from China. Importers should be aware that while the COO claims made by their vendors may be correct under the source country’s rules, they may be incorrect under U.S. rules. With an ever-increasing tariff burden at stake, as well as potential penalties for getting it wrong, it is important for importers to understand the applicable rules and verify COO claims made by their suppliers.
Unlike rules for value and classification, COO rules are not harmonized internationally. Countries often develop their own COO tests or adopt one from a particular free trade agreement. Even within a country the tests can vary depending on the specific issue involved. For example, different origin rules can exist for FTAs, product marking, or preference program qualification, to name a few.
The U.S. uses various COO tests in various circumstances, and there are essentially two tests used for determining COO for purposes of Section 301 duties: (1) substantial transformation or (2) the special origin rules found under 19 CFR Part 102. Which one to use depends on the product at issue.  
As a result, COO tests used by the country of manufacture (e.g., a specified percentage of local content) may not be applicable to determining origin for U.S. import purposes. Similarly, the last country of processing and export may not be the country of origin for U.S. purposes. …

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M. Ha: “Treasury Heightens Pressure on Facilitators of North Korean Sanctions Evasion”
(Source: FDD, 3 Sep 2019.) [Excerpts.]
* Author: Mathew Ha, Research Associate, Foundation for the Defense of Democracies (FDD), press@defenddemocracy.org.
The U.S. Treasury Department on Friday sanctioned two individuals and three companies for helping North Korea evade sanctions via ship-to-ship (STS) transfers. While this action reminds Pyongyang that Washington remains committed to enforcing all U.S. sanctions, it falls short of delivering a critical blow to North Korea’s efforts to bypass them.
Treasury’s latest targets are Taiwan-based individuals Huang Wang Ken and Chen Mei Hsiang, Taiwan-based companies Jui Pang Shipping Co Ltd. and Jui Zong Ship Management Co. Ltd, and the Hong Kong-based company Jui Cheng Shipping Company Limited. Treasury said that these five actors were either owners or operators of the Shang Yuan Bao, which violated UN Security Council Resolutions 2375 and 2397 last year by engaging in STS transfers of oil with two U.S.-sanctioned vessels, the Paek Ma and the Myong Ryu 1.
In March, a UN Panel of Experts report on North Korea sanctions enforcement disclosed that the Shang Yuan Bao was one of three vessels engaged in STS activity with sanctioned North Korean-flagged vessels. The other two vessels were the New Regent and the Xing Ming Yang 888, both of which share either ownership or management ties to companies based in Hong Kong and Taiwan. The Panel specifically recognized that these vessels and their owners were “operating out of ports within 600 nautical miles of previously identified zones in the East China Sea.” …

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M. Rendon: “Are Sanctions Working in Venezuela?”
(Source: CSIS, 3 Sep 2019.) [Excerpts.]
* Author: Moises Rendon, Director of the Future of Venezuela Initiative, Center for Strategic and International Studies (CSIS), mrendon@csis.org.
The Issue
As the United States, the Lima Group, the European Union, and other like-minded nations continue to increase pressure on the regime of Nicolás Maduro with diplomatic measures such as challenging his government’s legitimacy, the question remains as to whether sanctions are an effective measure for changing the behavior of the Venezuelan regime and pushing Maduro to step down. Despite external support by Russia, Cuba, China, and a few others, Maduro is more alienated on the world stage than ever before. That said, stiff sanctions and diplomatic isolation have not yet convinced Maduro to negotiate his exit while his regime has proven to be resilient and adaptable . As the humanitarian crisis deteriorates further, a debate has raged on among policymakers who worry that sanctions may be worsening conditions for Venezuelan citizens. This brief provides clarity on this complex issue. This report will assess the efficacy of past sanctions, as well as their impact on standards of living in Venezuela, and provide recommendations for improving policy in this area
Fast Facts
– By 2016, one year before financial sanctions were first implemented by the United States, the Venezuelan bolívar had already hit an inflation rate of 255 percent. Inflation has now surpassed 1 million percent and is projected to be 10 million percent by year end.
– Oil production in Venezuela dropped from roughly 2.4 million barrels per day in 2015 to about 1 million barrels per day at the end of 2018 before broad sanctions against PdVSA were implemented.
– Venezuelans lost an average of 24 pounds between 2016 and 2017. Over the same period, severe child malnutrition reached 15.5 percent.
– In addition to the European Union, five countries (the United States, Canada, Switzerland, Mexico, and Panama) have issued sanctions to address the Venezuelan crisis. …

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A. O’Meara: “The Tariff Classification of 18 Human Heads!”
(Source: Arthur O’Meara, O’Meara & Associates)
US Customs and Border Protection never lets anything slip through the cracks, especially O’Hare International Airport.
Apparently, the contents of this shipment from 2013, which arrived just in time for Christmas (someone should get credit for that) was a bit strange: “18 Human Heads”. The shipment was held up because the final destination was not clearly indicated in the shipping paperwork. We suspect, however, there may be another reason: CBP was unsure of the classification (HTSUS) of the human heads. After all, these cannot be classified as “corpses” for the same reason you cannot classify a table leg as a table (it is incomplete). See General Note 3 of the HTSUS:
General Note 3(e)(i) of the HTSUS provides that, for the purposes of General Note 1, corpses are not goods subject to the provisions of the HTSUS, provided they are “together with their coffins and accompanying flowers” (that last part is important, we are to presume). But these were heads. Just heads; not corpses, not the bodies, just…the…heads. And they were not in a coffin, nor were they accompanied by flowers. As you know, details are important when doing tariff classification, for it is in the details that the truth can be found.
Where do we exist, if not in our head? It could be argued that the head provides the “essential character” of the person, and that everything from the neck down is just packaging. Then, could General Rule of Interpretation 2(a), (“Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as entered, the incomplete or unfinished article has the essential character of the complete or finished article,”) be invoked to classify the heads as corpses? Though GRI-2(a) references a “heading,” and there is no heading for corpses, we can appeal to the spirit of GRI-2 in exempting the heads from the HTSUS on the grounds that they are, essentially, corpses without their normally included packaging.
Of course, if we accept the “essential character” argument, then the Italians would have had to throw a few roses into the coolers with the noggins and the dry ice, to meet the terms of the exclusion.
On the other hand (head?), we would likely remember our high school science class which taught us that, taxonomically, humans are part of the Kingdom of Animalia. I’d begin in Chapter 05, and conclude that the most appropriate classification would 0511.99.4070/1.1%: “Animal Products not elsewhere specified or included; dead animals of chapter 1 or 3, unfit for human consumption: Other: Other: Other: Other.”   Remember: when you do tariff classification, you must pay attention to punctuation. In the case of heading 0511, the semi-colon after the word “included” means that an animal product does not necessarily have to be from an animal in chapters 1 or 3.
Suggestions have been pouring in for the correct HTSUS of the human heads. Thanks to our loyal readers for the following:
(1) As they are just heads and not complete corpses, they should go under a “parts” provision
(2) Good thing the heads are of Italian origin; otherwise, they would be subject to the Section 301 duties.
(3) If they were smiling, how about “festive articles?”
The complete article in the Chicago Tribune can be found here, and here.

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ECS Presents “2nd Annual ECS ITAR/EAR Symposium and Managing ITAR/EAR Complexities” on 17-19 Sep in Annapolis, MD
(Source: ECS)
* What:  The 2nd Annual ECS ITAR/EAR Symposium and Managing ITAR/EAR Complexities, Annapolis, MD
* When:  September 17-19, 2019
* Where:  Chart House
* Sponsor:  Export Compliance Solutions & Consulting (ECS)
* ECS Speaker Panel: Philip Kuhn, U.S. Department of Commerce; Debi Davis, Esterline; Scott Jackson, Curtiss Wright; Matt Doyle, Lockheed Martin; Matthew McGrath, McGrath Law Group and ECS staff. 
* Register here or by calling 866-238-4018 or email spalmer@exportcompliancesolutions.com

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TE_a213. FCC Presents “Designing an ICP for Export Controls & Sanctions”, 1 Oct in Bruchem, the Netherlands

This training course is designed for compliance officers, managers, and other professionals who aim to enhance their organization’s compliance efforts. The course will cover multiple topics and tackle various key questions, including but not limited to:
– Setting the Scene: ensuring compliance in the export control and sanctions arena
– What is expected from your organization? A closer look at the official frameworks and guidelines from U.S. and European government agencies
– Key elements of an ICP
– Best practice tips for enhancing your current compliance efforts  
– Internal controls samples (policies, procedures, instructions)
– Strategic benefits of having an ICP.
* What: Designing an Internal Compliance Program (ICP) for Export Controls & Sanctions
* Date: Tuesday, 1 Oct 2019
* Location: Full Circle Compliance, Landgoed Groenhoven, Dorpsstraat 6, Bruchem, The Netherlands
* Times:
  – Registration and welcome: 9.00 am – 9.30 am
  – Training course hours: 9.30 am – 4.30 pm
* Level: Intermediate
* Target Audience:  the course provides valuable insights for both compliance professionals, employees and (senior / middle) management working in any industry subject to U.S. and/or EU (member state) export control laws and sanctions regulations.
* Instructors: Drs. Ghislaine C.Y. Gillessen RA and Marco M. Crombach MSc.
* Information & Registration: click
here or contact us at 
events@fullcirclecompliance.eu or 31 (0)23 – 844 – 9046.  

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* Louis XIV (Louis Dieudonné; 5 Sep 1638 – 1 Sep 1715; known as Louis the Great (Louis le Grand) or the Sun King (le Roi Soleil), was King of France from 14 May 1643 until his death in 1715. His reign of 72 years and 110 days is the longest recorded of any monarch of a sovereign country in European history.)
– “Every time I appoint someone to a vacant position, I make a hundred unhappy and one ungrateful.”
– “It is legal because I wish it.”
* Bob Newhart (George Robert Newhart; age 90 today, born September 5, 1929; is an American stand-up comedian and actor, noted for his deadpan and slightly stammering delivery. Newhart came to prominence in 1960 when his album of comedic monologues, The Button-Down Mind of Bob Newhart, became a worldwide bestseller and reached number one on the Billboard pop album chart; it remains the 20th-best selling comedy album in history.)
– “I don’t like country music, but I don’t mean to denigrate those who do. And for the people who like country music, denigrate means ‘put down’.”

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. Are Your Copies of Regulations Up to Date?
(Source: Editor)


DHS CUSTOMS REGULATIONS: 19 CFR, Ch. 1, Pts. 0-199.  Implemented by Dep’t of Homeland Security, U.S. Customs & Border Protection.

  – Last Amendment: 5 Apr 2019:
84 FR 13499-13513: Civil Monetary Penalty Adjustments for Inflation

: 15 CFR Subtit. B, Ch. VII, Pts. 730-774. Implemented by Dep’t of Commerce, Bureau of Industry & Security.

  – Last Amendment: 21 August 2019: 
84 FR 43493-43501
: Addition of Certain Entities to the Entity List and Revision of Entries on the Entity List and 84 FR 43487-43493: Temporary General License: Extension of Validity, Clarifications to Authorized Transactions, and Changes to Certification Statement Requirements


* DOC FOREIGN TRADE REGULATIONS (FTR): 15 CFR Part 30.  Implemented by Dep’t of Commerce, U.S. Census Bureau.
  – Last Amendment: 24 Apr 2018: 83 FR 17749-17751: Foreign Trade Regulations (FTR): Clarification on the Collection and Confidentiality of Kimberley Process Certificates
  – HTS codes that are not valid for AES are available here.
  – The latest edition (4 July 2019) of Bartlett’s Annotated FTR (“BAFTR”), by James E. Bartlett III, is available for downloading in Word format. The BAFTR is a 152-page Word document containing all FTR amendments, FTR Letters and Notices, a large Index, and approximately 250 footnotes containing case annotations, practice tips, Census/AES guidance, and explanations of the numerous errors contained in the official text. Subscribers receive revised copies in Microsoft Word every time the FTR is amended. The BAFTR is available by annual subscription from the Full Circle Compliance website.  BITAR subscribers are entitled to a 25% discount on subscriptions to the BAFTR. Government employees (including military) and employees of universities are eligible for a 50% discount on both publications at www.FullCircleCompiance.eu.   


  – Last Amendment: 18 May 2016: Change 2: Implement an insider threat program; reporting requirements for Cleared Defense Contractors; alignment with Federal standards for classified information systems; incorporated and cancelled Supp. 1 to the NISPOM (Summary here.)
DOE ASSISTANCE TO FOREIGN ATOMIC ENERGY ACTIVITIES: 10 CFR Part 810; Implemented by Dep’t of Energy, National Nuclear Security Administration, under Atomic Energy Act of 1954.
  – Last Amendment: 23 Feb 2015: 80 FR 9359, comprehensive updating of regulations, updates the activities and technologies subject to specific authorization and DOE reporting requirements. This rule also identifies destinations with respect to which most assistance would be generally authorized and destinations that would require a specific authorization by the Secretary of Energy.
DOE EXPORT AND IMPORT OF NUCLEAR EQUIPMENT AND MATERIAL; 10 CFR Part 110; Implemented by Dep’t of Energy, U.S. Nuclear Regulatory Commission, under Atomic Energy Act of 1954.
  – Last Amendment: 20 Nov 2018, 10 CFR 110.6, Re-transfers.

* DOJ ATF ARMS IMPORT REGULATIONS: 27 CFR Part 447-Importation of Arms, Ammunition, and Implements of War.  Implemented by Dep’t of Justice, Bureau of Alcohol, Tobacco, Firearms & Explosives.
  – Last Amendment: 14 Mar 2019: 84 FR 9239-9240: Bump-Stock-Type Devices 


DOS INTERNATIONAL TRAFFIC IN ARMS REGULATIONS (ITAR): 22 C.F.R. Ch. I, Subch. M, Pts. 120-130. Implemented by Dep’t of State, Directorate of Defense Trade Controls.
  – Last Amendment: 30 Aug 2019: 84 FR 45652, Adjustment of Controls for Lower Performing Radar and Continued Temporary Modification of Category XI of the United States Munitions List.  
  – The only available fully updated copy (latest edition: 30 August 2019) of the ITAR with all amendments is contained in Bartlett’s Annotated ITAR (“BITAR”), by James E. Bartlett III. The BITAR is a 371-page Word document containing all ITAR amendments to date, plus a large Index, over 800 footnotes containing amendment histories, case annotations, practice tips, DDTC guidance, and explanations of errors in the official ITAR text. Subscribers receive updated copies of the BITAR in Word by email, usually revised within 24 hours after every ITAR amendment. The BITAR is available by annual subscription from the Full Circle Compliance website. BAFTR subscribers receive a $25 discount on subscriptions to the BITAR, please contact us to receive your discount code.

* DOT FOREIGN ASSETS CONTROL REGULATIONS (OFAC FACR): 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders.
Implemented by Dep’t of Treasury, Office of Foreign Assets Control.

– Last Amendment: 4 Sep 2019:
84 FR 46440-46448 – Nicaragua Sanctions Regulations


, 1 Jan 2019: 19 USC 1202 Annex. Implemented by U.S. International Trade Commission. (“HTS” and “HTSA” are often seen as abbreviations for the Harmonized Tariff Schedule of the United States Annotated, shortened versions of “HTSUSA”.)

 – Last Amendment: 4 Sep 2019: Harmonized System Update (HSU) 1915    

 – HTS codes for AES are available here.
 – HTS codes that are not valid for AES are available here.

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Weekly Highlights of the Daily Bugle Top Stories

(Source: Editor) 

Review last week’s top Ex/Im stories in “Weekly Highlights of the Daily Bugle Top Stories” published  

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* The Ex/Im Daily Update is a publication of FCC Advisory B.V., compiled by: Editor, James E. Bartlett III; and Assistant Editor, Alexander Witt. The Ex/Im Daily Update is emailed every business day to approximately 7,500 readers of changes to defense and high-tech trade laws and regulations. We check the following sources daily: Federal Register, Congressional Record, Commerce/AES, Commerce/BIS, DHS/CBP, DOE/NRC, DOJ/ATF, DoD/DSS, DoD/DTSA, FAR/DFARS, State/DDTC, Treasury/OFAC, White House, and similar websites of Australia, Canada, U.K., and other countries and international organizations.  Due to space limitations, we do not post Arms Sales notifications, Denied Party listings, or Customs AD/CVD items.

* RIGHTS & RESTRICTIONS: This email contains no proprietary, classified, or export-controlled information. All items are obtained from public sources or are published with permission of private contributors, and may be freely circulated without further permission, provided attribution is given to “The Export/Import Daily Bugle of (date)”. Any further use of contributors’ material, however, must comply with applicable copyright laws.  If you would to submit material for inclusion in the The Export/Import Daily Update (“Daily Bugle”), please find instructions here.

* CAVEAT: The contents of this newsletter cannot be relied upon as legal or expert advice.  Consult your own legal counsel or compliance specialists before taking actions based upon news items or opinions from this or other unofficial sources.  If any U.S. federal tax issue is discussed in this communication, it was not intended or written by the author or sender for tax or legal advice, and cannot be used for the purpose of avoiding penalties under the Internal Revenue Code or promoting, marketing, or recommending to another party any transaction or tax-related matter.

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